After looking like it was on the edge of a cliff last week,
Bitcoin crashed over the weekend and lost more than 20% of its
value.

The crypto-currency fell as low as $970 and is trading at just
over $1,000 this morning, after reaching $1,259 last week.

According to The Wall Street Journal, the
crash is due to a disagreement among Bitcoin developers. Behind
the scenes, there’s been a running two-year battle for how best
to run the digital platform that forms the basis of the Bitcoin
marketplace.

In the Bitcoin market, transactions get traded in batches known
as “blocks”. Currently, the maximum size that can be processed
for one block of transactions is one megabyte. Competing
developers have been agitating to increase the size of the
trading blocks as the network expands.

Recently, a proposal was raised to create a platform called
Bitcoin Unlimited, which would put no size restrictions on the
size of blocks for processing transactions. Developers who want
to maintain the current version are adhering to a proposal called
Bitcoin Core.

So what caused the crash?

Proponents of the Bitcoin Unlimited format are threatening to set
up a “hard fork” for the Bitcoin marketplace, effectively an
alternate software platform to trade Bitcoin on. The new format
would be incompatible with the current platform, thus creating a
split meaning that there would then be two versions of the
currency.

A key driver of stability in the market for bitcoin is that every
transaction is recorded and logged, which in turn creates an
error-proof and transparent record of the currency’s transaction
history. A dual market would muddy the waters around historical
record keeping. The increased possibility of a dual market for
bitcoin has therefore added to uncertainty and heightened
liquidity risk for market participants.

On Friday, 20 bitcoin exchanges released a statement saying that
they while they wouldn’t expressly endorse the new platform, “it
is incumbent upon us to support a coherent, orderly, and
industry-wide approach to preparing for and responding to a
contentious hard fork”.